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In the text box below, answer one of the following questions in 300 / ­400 words.

A. What is Say’s Law? How may it fail to hold in a monetary economy? B. Explain how deficit spending may increase national output in a setting of flagging private investment. How does the propensity of consumers to spend their income shape this effect? C. What are the three types of financial structure identified by Hyman Minsky? Which of these types would best explain the situation faced by somebody taking out an interest­only mortgage? D. What are the limitations and possible analytical problems with the theory of comparative advantage? E. “In order to industrialize and ‘catch up’ economically, developing countries should adhere to the same ‘free­trade’ principles upheld by Britain as it industrialized in the course of the nineteenth century.” Discuss.

Explanation / Answer

A)According Say's law supply creats its own demand. He said if a businessman produces a good ,then he will be keen to sell it.This production creates wages for workers and income for the businessman ,therefore the production has increased wealth and lead to demand for othe goods.But this law will be fail if money will goes out of the circular flow of income.

B) If deficit financing of Government Balance by issuing new notes by Centeral Bank.It will increase money supply ,which increase the propensity of consumption,Means increase the aggregate demand ,which increase production,and private investment.

C)According Hyman Minsky Robustness And Fraglity create Business cycles.Business cycles has four situation-Boom,Euphoria,profit taken and depression.three main activatores are businessman,bankers and portfolio managers.

D) 1. Transport coasts may outweigh any camparative advantage.

2.Increased specialisation may lead to diseconomies of scale.

3.Government may restrict trade.

4.It is a static advantage but not any dynamic advantage.

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